Chamber in Review
BRI Opportunities for Financial Services
BRI Opportunities for Financial Services<br/>「一帶一路」金融服務機遇

The coronavirus pandemic has forced the world’s economies into lockdown. In Hong Kong, this has followed the disruption caused by the U.S.-China trade tensions and a prolonged period of social unrest. 

While the short-term future seems grim, once the pandemic is brought under control, companies will be looking to recuperate their losses as countries rebuild their economies. This may give the Belt and Road Initiative (BRI) added momentum as businesses are incentivized to explore untapped opportunities. At a Belt and Road Working Group webinar on 27 April, board members of the Financial Services Development Council shared their views on the challenges and opportunities in the asset management, banking and insurance sectors.

Chen Ding, CEO of CSOP Asset Management, noted that, despite the pandemic, there had been continued growth in investment in Belt and Road-related projects in 2020. In the first two months of the year, Chinese companies committed new investments totaling US$2.7 billion to 48 countries and regions, up 18% year-on-year. The number of newly signed big projects, of over US$50 million, increased from 115 in 2019 to 144 in 2020. 

It is, however, also a challenging time for China’s globalization plans, as countries such as the United States and Japan try to lure manufacturing out of Mainland China to their countries. Ding said that China has the advantage of an abundance of skilled labour, with more than 8 million university graduates joining the workforce every year, compared to 4 million in the U.S. China also remains considerably cheaper for manufacturing than developed economies.

“Chinese R&D professionals are producing products at 10% to 20% the cost of their counterparts in other countries,” Ding said.

On the other hand, the skills of Chinese workers gives China an edge over cheaper manufacturing destinations. 

“So while the pandemic may push manufacturers to low labour cost countries – such as Vietnam, Indonesia and India – China, with more skilled workers, will still hold the advantage in high-value-added manufacturing.” 

Brian Li, Co-Chief Executive of Bank of East Asia, said that Hong Kong’s robust banking system means that banks have considerable liquidity to help them tackle current challenges, and together with the Government, banks had been providing financial support to businesses in Hong Kong, in particular SMEs. 

“Support extended by the banks have been unprecedented, from principal moratoriums and contingency loans to extended repayment schedules and waiving penalty fees,” he said. “Up to 21 April, banks had already approved 11,000 applications with an amount totaling HK$86 billion.” 

In the short term, companies will be looking to recover from the shock, Li said, but looking ahead, Hong Kong’s professional services sector will also see opportunities in the BRI. 

“One thing that the pandemic has done is it has revealed weaknesses in global supply chains during crises and overwhelming shipping demand,” he added. “Countries along the BRI and in ASEAN will require significant amounts of investment post-Covid-19 to improve their supply chains, upgrade their facilities and implement new technologies. Hong Kong’s professional firms should be well positioned to add value here.”

Also speaking at the webinar, Winnie Wong, CEO & Executive Director of Asia Insurance & Avo Insurance, explained that the insurance industry plays a crucial role in terms of making sure that BRI projects are bankable and feasible. 

“Many perceive there is a much higher political and construction risk when investing in BRI countries,” she said. “Insurance for political, war and terrorism risks, along with warranty and indemnity insurance, are particularly helpful for businesses investing in new markets.” 

The pandemic has accelerated the transformation of online transactions, Wong added: “The financial industry has been pushed to further innovate and facilitate online transactions, and there are calls for a Digital Belt and Road to integrate with new products such as virtual banking and virtual insurance.”

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